Media M&A

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All opinions expressed by hosts and podcast guests are solely their own opinions. Hosts, podcast guests, their employers or affiliates may maintain positions in the securities discussed in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. - This is Matt Russell, and today we are exploring the world of media deals. My guest is Blake Saunders. Blake has been in media investment banking for about two decades. When I first met him, he was a banker. So I wasn't expecting to lean into this relationship, but I often introduce Blake to others as the banker that is really great, that I really love. And he's been one of the best resources for me over the past three years, because he's simultaneously involved with those making eight or nine figure deals, those who pay his paychecks, as he is with the new media upstarts and everything that's happening in the podcasting universe, the sub-stack universe, the YouTube universe. So I took what would otherwise be a private conversation and did it for the podcast. We get into the deal landscape that exists today and some of the realities of the media market and how companies are dealing with this new era and then who's best position for the next chapter. I benefited from Blake who had previously been known to some as the anonymous banker who wrote some amazing things over the past year because he came out of hiding and was willing to come on to the podcast with us. So please enjoy my conversation with Blake Saunders. All right, Blake, I am excited to finally have you on the show and I can have you on without having to refer to you as the anonymous banker as you've come out of hiding here. You have a deep history in media. You've been an incredible resource to me as a media banker over the past few years. I wanted to start this out very high level. We're gonna get into a lot of the weeds, but as I was trying to come up with topics, it's incredibly difficult for me to define media. So I thought the best place to start was to have you share your view on what media means to you. Media at a high level is effectively content that's monetized via subscriptions or advertising. It takes on so many different forms and continues to evolve. It started at the beginning with books and manuscripts and that evolved to newspapers and then radio and then television. And I think each success of iteration of media to where we're at today gets more addicting, more engaging. At the end of the day, either the media company is making money because someone's paying them directly or they're helping an advertiser brand agency get someone to make a purchase decision and make that purchase. - You hit on a good point at the end there in terms of who the actual customer is, whether it's the advertiser or the audience itself. But going into your history as a banker, you've been in this media market in the M&A markets for decades now, not to get into age dynamics. I'm right there with you. But what would you sketch out is the major thematic changes in terms of what has changed from the early days in your career to where we are today. And I would use an M&A lens if you can, but whatever you would say to capture thematic changes. - I think the biggest change that happened in media, just in general, is the internet, even though it made distribution free, people's perception of what they were building and how to create value in the last 25 plus years has been to build it quickly and then sell it. I think before that, newspapers and things like that were owned by families for multiple generations and they were really stable and great businesses, TV. There's a lot of media companies today that still have family ownership, like Condi Nast and Hearst. So that's a big change. And the reason why it's changed, and it's not the best, is the lens has shifted from businesses that maybe don't take that much money to start and are very cash flow generative and stable. Newspapers, they had basically a monopoly and the federal government actually regulated what you could own. This was a rule that went away, but you couldn't own TV, radio, newspapers in the same market because they were worried about a monopoly. The problem is Google and Facebook now came into these markets and effectively took a lot of the advertisers because they just were able to get customers easier. Starting 20 plus years ago, you saw people that were raising money to build media businesses that may not ever be profitable with the pure goal to get it big enough to then sell it to another media company. Where we find ourselves today is we're in a spot where it's really tough, every company is struggling. I think people that have subscription and direct contact with their consumers are doing okay, but anyone that's relying on organic search traffic to drive advertising revenue, anything is really tough because the degradation you're seeing in consumer engagement is really high. And this is also on the TV side too. In the US, a fully distributed cable network used to have like 110 million households. This was seven or eight years ago. So it's not that long ago. Today it's 55 million. And the reason why that matters for TV and cable is that each of those households that are subscribing are paying a fee to Comcast or one of the other distributors. And part of that fee is then making its way to ESPN or whatever cable network. If you have that, you've effectively halved your revenue. And they have other places to get revenue from, like advertising, but these businesses are changing rapidly and most of the value is accruing in the hands of a few people, Google, Facebook, Amazon. - It's incredible the breath out there where there's literally no barriers to entry now for anyone in the media space. I did wanna put the lens back on you in terms of going through your career, working for institutions. You've made this change recently, which I wanna get into. Can you talk about why you left your firm recently and whether any of these developments had anything to do with you taking a different strategy personally? - I was at a small firm called Methusel Advisors for 15 and a half years, I think, 14 and a half years. And then I spun out a couple of weeks ago, started my own platform. Being at a small firm, you're always, you go to market when you talk to clients. Yes, it's about your partners, but it's also, they're hiring you. When you're at a larger bulge bracket, you have a multitude of services to sell into a client across the board. So debt capital markets, equity capital markets, so you're able to provide more services. I started at Citigroup for a year and then joined the smaller platform. Effectively for 15 years, I was just selling air, literally ideas. I just see the world changing a lot in terms of how firms will be structured, what clients want, and sort of the services we can deliver. I wrote this unique LinkedIn post and I titled it "Conscious Uncoupling." When you're in a partnership for 15 years, it's a conversation. It's not like I'm sending an email or I'm sending a PDF with a signature on it. It was a conversation, and I think it just made a lot of sense. I wanna build something that can sustain these changes that are happening across the landscape. There's gonna be less deals in media. The way to take businesses to market is changing dramatically. Typically, the best sell side process, so when a banker sells a business, is getting an asset that you can market. You can basically have someone young on your team send it out to 30 people and get five or 10 or 15 bids back. And then you decide and then you take, whoever you want to a second stage and pick the ultimate winner of an auction process. But that's changed. And in order to sell media companies or media adjacent businesses, it's much more hands-on, much more custom processes. So that's where we're building. It's different. - I think there's a lot of strategic insights from the media that you know very well and not to blow smoke, but you're incredibly well plugged in in terms of the new developments. But I also think there's a parallel to what's happened in media and seeing individuals go out on their own versus working under institutions and for a variety of different reasons. So it's interesting when these things come together. One of the things that I wanted to get your insights on was I get a lot of exposure to the theoretical sellers. Those that are building media businesses from the ground up and these tend to be smaller size, but even some of the medium size, I don't have nearly as much insight in terms of the buyers. How do you frame buyers in the medium market? We could take this so many different ways, but do you have a framework for thinking about who are natural buyers in this market? And you collaborate on that however you like. - It's super dynamic. With some of my clients or people that I'm trying to pitch, I make this basic statement, which is if you're thinking about hiring a banker, 'cause a lot of times most of what you do in banking is you just copy and paste what you did six months ago 'cause you're doing a bunch of busy work. - Don't give away the secrets. - Yeah. If you're thinking about hiring someone that's copying and pasting a presentation from even two or three months ago, it's probably changed. The demands and the desires of larger media companies and where they want to invest is changing rapidly. Perfect example is Substack. I think you'll start to see more and more M&A around Substack. You saw Bloomberg a couple of days ago announced that they're gonna turn on Substack. CNN said they're gonna lean more into newsletters a couple months ago. There's a reason why this happens. A lot of large media companies have been trained to be slow movers. When the platform started to get bigger, they would offer unique things. Facebook turned on Facebook video and they did all these partnerships with larger media companies and they're like build video teams, create video for Facebook and we'll help you with the monetization. The monetization never happened and Facebook shut that down after a year. And then they let everyone else suffer and clean up the mess of, okay, what do we do with this team of five or 10 that we just hired? A lot of media companies have been slow movers to adapt to change, but as soon as their competitors start to make moves, then there's like a fast follow. That's what I expect to see. It seems like more of them are getting wise to some of these new mediums. The biggest one that I'm sensing now is YouTube. Think about the late night shows and don't think about it in the context of them all getting canceled. But prior to that, they used to use YouTube as a place for like shoulder or adjacent content. So say Jimmy Kimmel did a fun lip sync or something like that. He would clip it up and put it on YouTube. And so they always thought of the YouTube as like a second run place to continue to cultivate their audience to get them back to TV. What you're starting to see with the larger traditional media companies, and it's just happening now, is them realize, oh, wow, we should think of YouTube as a first run spot. So let's actually make content for that. And the reason is because the brands and agencies are finally willing to buy direct on YouTube and buy it like they do TV. So I think hot ones, this show that the business sold at a pretty good multiple because they sell it like TV. TV sells adjacency. Yes, they sell reach, but they also sell adjacency. So when large brands want to buy advertising, they want to make sure that the content aligns with the person that they're going after. And everybody has done a lot of studies around this. Even premium content that has the wrong negative connotations, even if it's a premium show that everyone loves, it could actually harm a brand by having the interstitial of a commercial in it. And so brands care about adjacency and the show like hot ones can effectively go buy their inventory from YouTube and resell it to brands. And that's what they do. They go to Procter and Gamble or Coca-Cola and they say, hey, we're going to have these two actors on this week, will you come in and buy this week? And this is your reach and this is who you're going to be next to. And that's been really profitable for that business. Larger media companies are starting to spin up digital ad sellers and think about the YouTube ecosystem in a much different way. This is the backdrop to say digital media done right, will continue to be more valuable. Yes, it's going to be hard to sell a creator led YouTube channel, totally get that. But I think hot ones is a good example of a business that yes, there's a host on it. But I think what people forget is there's been hosts on most TV shows. There's actors that are specific to those shows. Seinfeld has a lot of value. And we sometimes forget this key man risk that exists in most content. Even with hot ones, there was a little bit of salacious gossip around the host and people forgot about that in two seconds. - People reference hot ones. They don't reference Sean or Sean's show. It's a good framework. In that particular anecdote about them buying back the inventory from YouTube and then selling it was interesting and kind of a missing piece to me just in terms of the sale. So that's interesting in the weeds. Applying the same thought process to something like Substack, which feels a little bit less obvious to me where YouTube has this natural analog to television. When you see more movement into Substack to me, that's a net positive for Substack as a platform. We've seen plenty of brands now just lean into that. What is that telling you just in terms of is this a signal that Substack is now considered where you can get eyeballs for newsletters? What are the dynamics that are driving that in your mind? - For media companies, their whole goal is to reach an audience. Substack is purely a platform. It's easy to reference Substack. I think you could just say the category of newsletters. I think a media company would buy any newsletter. Just some of the fastest growing newsletters happen to be on Substack. I think if a media company buys a Substack, they're stupid to take it off. I think they're starting to see it more as a platform instead of a competitor. There are some people on Beehive, but where the best talent has gone seems to be Substack. I make this comment that I think we'll look back and we'll say that there's never been a cheaper time to buy YouTube channels. That gets a retort of like, well, what about this one, what about this one? That's not a specific comment around a specific person. And the same thing with Substack. I'm not making a claim that every single Substack can be bought. YouTube, every channel is different. Same thing with Substack. People group all of these together. The Substack that we'll get transacted on are ones that are basically harmonized with the content of whosoever buying it. This is a random example. If someone has a really good cosmetic tutorial or something like that, you could see a cosmetics brand buying that or like a news one where it's just links. You could see a news company wanting to buy that 'cause it fits within maybe a premium product. So there's such a diverse group of YouTube channels and Substack that you can't say, oh, every single Substack is gonna be valued at X and they should all sell for Y. It's not gonna happen. It's more about very specific types of content. - The buyers, do you see them as the legacy media channels like a Bloomberg or a New York Times or is this filtering into the territory of cosmetics brand and corporations where every entity is now a media entity? When you think about strategic buyers or who's dominating the buyer side of the equation, where does that tend to lie? - I think anyone that has to pay a toll to Google and Facebook to acquire a consumer, there's like a really cool B2B newsletter and website all around this gig economy. It's the number one site to help Uber drivers and Lyft drivers sign up and then they communicate all the new rules and things like that. It's a completely private site. Would Uber buy that? Maybe because they pay so much to get every single driver to sign up and complete the application on their platform to then be a driver and they have a high churn. So when you go through cycles and the valuations are starting to go up, you see people enter the fray that wanna pretend like they can operate a media company. It usually never works. Cosmetic companies got into YouTube channels 10 years ago. I think SA Lotter had a whole push into a beauty YouTube channel. I don't think it worked out that well because most people that are not media companies can't operate a media asset. I think it will be a mix. And that's again why I think on some assignments we can basically be better positioned than other large platforms is there's not 20 buyers for these businesses. There's like three to five and you really have to communicate in a direct way what the value is. - And just to hammer on that point, this list of potential buyers, are they actively seeking to find solutions to whatever problems they're having like what you mentioned? Or is it coming in the opposite direction where sellers are looking to strategically place themselves with buyers and you need to pitch the buyer on the reasoning? - I think it's both. Every company is really different. The way that you navigate it is different. Some of them when they have family ownership are still led from the top. So someone will say, go buy this and I really don't care what we pay for it. So they have a corporate development team that's good at negotiating pricing but they're not price sensitive. But it's a mix because there are a lot of people coming to market in podcasts. Yes, assets are for sale. But typically I think some of the best deals are born out of longer term. Think about the free press. That relationship is not something that I guess they kind of started at the Allen and company conference but I don't think Barry was for sale technically. - On the point around media always seems to hammer on the importance of content. Is that still the holy grail in your view? - There's a nuance to that. And what I mean by that is Facebook and Snapchat and TikTok, they're oriented to ensure that UGC content is the most addictive because they don't have to pay for that. Instagram is a lot like a media company but they don't pay for any of the content. One of the reasons why I have very strong views on how to fix up stack is because I want places where premium content can fully monetize to continue to exist. It's kind of like the American diet. And I think this happens everybody. You go to Europe, you lose weight and you're like, I'm gonna come home and I'm gonna eat healthy. I'm gonna try to eat that way. And you go to the farmer's market and you read the packaging for a couple of weeks and then you go back to eating at McDonald's. The unfortunate thing is premium IP matters. And we can talk about that in a second with Paramount. But the platforms have made shitty content highly addictive. And that goes back to why certain YouTube channels will be less valuable or more valuable on the hands of a media company. But I think it's because they're creating premium-like content. Maybe not using the budget of premium content but creating premium content that users using the analogy of food are getting real value from. An interesting thing with Paramount. So they spent a lot of money on South Park, spent a lot of money on the UFC. And I think what their strategy because they have the budget to buy stuff is instead of worrying about where the stuff is going to live ultimately they wanted to live in Paramount Plus and people to subscribe. But I think their positioning is they used to have the zeitgeist with MTV and all these cable channels that's gone. And so how do we turn that back on instead of worrying about where it lives today? I think their most focused on let's go figure out our target customer and what are they watching that we can actually go easily get. The two things I just referenced those are major draws. South Park even in its whatever 22nd season or 21st season still is funny and still is relevant and still is making news. The UFC I think is one of the most watched sports. They did a good job during COVID basically turning themselves back on really quickly. They're bringing it in the form where you're not going to do the pay-per-view but I think it'll still feel like a premium product that you can only watch on Paramount. - Yeah, it's interesting for both of those properties. You seem to hit a specific demographic as well and you have this die hard audience for lack of a better term where you can feel more comfortable that they're going to port over with you versus there's many other large audiences where if it went behind a paywall I always referenced the economist had an 85% drop in its podcast listenership after they brought their podcast behind a paywall which there's I'm sure other things going on in the numbers but it's interesting to me where there's a test of when something is free versus when something moves and you see that same audience go with them. So it's interesting just to hear the dynamics of what they targeted. How many assets do you think are out there that are that particularly powerful in terms of they have the scale but they also have this engagement which feels stronger than you would find. Top Decile is what I would say easily. - The interesting thing in media is that it's ever changing. New shows come along. One thing I heard from a producer is the unfortunate dynamic of all these numbers and all these statistics is a lot of shows are not getting a chance to breathe. And so most of the good content that we look back and say that was a really good fucking show it took them two or three seasons and now they get cut after one if they don't show the right metrics. A lot of the best shows when Netflix first came out they were basically green lighting their own content. So much of it was built in a way to have you binge. A lot of new content that's being created is more addictive but is not as good. So I don't know if it will have the underlying IP and asset value. I think the way to think about it is like what do you watch? I don't watch TV. So I have a hard time saying what's valuable. I think there's probably some really good podcasts. The next iteration is some of these podcasts can have the same amount of advertising weight as like a good TV show. And you've seen Sirius XM do a really good job of partnering because they have like an insane audio sales team the best. And that's why they do these deals is because they know that they're gonna get the deepest penetration with the right advertisers, get good CPMs. Again, I don't watch TV. So I don't know any other valuable IP that's the same weight as South Park 'cause that's a lot of money. - And there's very few appointment viewing things. I think that's why you see this flock towards live sports. It is truly appointment viewing. UFC, I would put into that category. South Park, one of the last things that I'm sure their audience would still view as appointment viewing maybe not as strong as it once was. - Sports is probably a big mess on my part. So sports is probably the easiest, the heaviest weighted thing where you're gonna see a different adjudication of who owns the rights, how they're able to be used because there's been sort of a shakeup 'cause sports rights are controlled at a couple different levels in market versus national broadcast. And it was a way to basically put more value back to the teams when Sinclair acquired a bunch of the RSNs and then ended up having to restructure those businesses. A lot of those rights got put back into different areas. They just changed. Those are really valuable for the sports teams. It was driving a lot of the value. So probably sports is the place where you're gonna see billion dollar plus M&A type deals or rights deals. I was having a hard time think about specific content. It's incredibly rare to have that type of, you wanna be there in the moment because now things you might wanna watch, they just pile up. You're just getting fed with so much content. So I have books, TV shows, things that have just been on my list for a while, which is a lot different than it used to be. - One of the things that's always been misjudged is the value of IP libraries, meaning people misperceive them as being more valuable 'cause there's just a ton of degradation. In most content formats, the first 30 to 60 days is where all the value is and then it degrades exceptionally quickly with technology. Now, I think there's gonna be unique opportunities with these libraries of IP. Music, TV shows, scripts, books, all this stuff because you can reimagine it in a much quicker way. I'm sure there's like some crazy esoteric union rules about what you can and can't do and how you can use the actors. But it is something interesting to think about. Good stories and narratives can be reimagined in a lot of different ways. I think there's gonna be opportunities to use these libraries to reimagine content in the future and imagine if instead of having to hire actors and stuff, it was just a kid behind a keyboard. When Disney recolored some of the movies, it's that quick with obviously new content, better content, things like that. - It taps into what a lot of the studios did with Marvel originally, but these ideas of superhero movies where the superheroes sold the movie, not the actors, and there was a way to not have to pay nearly as much now things fully came full circle. But if it's not the humans that are attracting the audience, you can hire lower cost labor, you can juice that up, you can recreate the same things and you're still gonna get a similar audience, which I think is interesting. And on the technology, I think you saw it in the music industry where a lot of those old catalogs, I mean, this wasn't even reimagining it, but by having the streaming come into play, you saw Spotify reinvigorate a lot of these royalty streams and then not only did you have a pickup in terms of the income that was coming in, you in theory had better visibility or at least that's what the funds were selling, that because of you having this hard data, you had better visibility into what it would look like in the future and that industry took off and that was from technology unlocking historic IP and bringing new income streams to it. Taking the music one, 'cause in music, a lot of musicians never make a lot, so you have hobbyists and stuff like that. There's a company right now where they focus on a couple songs each week and have 20 plus musicians, two different versions of that. 'Cause there's been a few songs that have been put as the intro or atroes to TV shows that have become hits. What they're using is technology to help them produce faster. So they send the songs out to everybody. Everybody works on it for a week. They come on Friday, they have like a listening session where they listen to everyone's songs. They pick five and then they fully produce those and then they go repitch those songs for commercials and all these different things, taking it a next step further where they're using this base of IP and then they're reimagining it with a slightly different tone and turning it back on basically. One, they don't have to pay these musicians that much at all and two, if they hit it and they can grow the value of one song, they could change the entire value of a portfolio of songs. - Going back into some of the new dynamics of the media upstarts that we're seeing today, one of the interesting themes up until the churn and deal with Barstool was how do you apply a multiple on a business where there's such high key man risk? Where does that stand today just in terms of the comfort level of acquiring businesses that are built around individuals and it's hard to separate the individual from the brand versus those that are able to accomplish the brand while being a key individual versus those that just try to go the full brand route and limiting the individual connectivity? - I think the reason why you see more person driven brands is it is the easiest way to get audience and get scale. Obviously most podcasts are led by the person 'cause you can't have a brand. Certain forms of media like cooking, it's really personal. If you're selling a recipe website, you'll get dinged because they're worried about it. But what you're trying to show is look, this person's been producing content for 10 or 15 years. Even though they may get a large check at the end of a transaction, there's ways to tie them into whatever company going forward. Each time it's a unique situation, but Mr. Beast, I think has done it pretty well from the perspective of he's been able to raise a lot of money around the Feasibles and other things like that. And when you look at his go to market, it's not just the YouTube channels, it's like everything else he's gonna build that will create ongoing value. But I think people see Jimmy as someone who is much more than just his YouTube channel. And if you talk to people that work with him, he's very focused on this business, not just the content, how he drives to metrics and things like that sounds like any other really strong founder. It's a case by case basis. Most large media companies do a pretty good job of trying to get a sense of who that person is. And that's what they'll base what they're buying. But when TCG invested in Barstool, Dave smartly said, I'm gonna step back from the day-to-day CEO role, but he still drove so much of the engagement. And I think most media companies at a smaller scale need someone like that, or they have a team of people, there's a reason why you're showing up and it's not just because of the brand. - On the idea of those individuals or those brands having a lane, we often think about certain creators or businesses and their sub-stack or their YouTube or their podcast, but then you see them, they're building out newsletters and they're building out all these other properties through the lens of a buyer. How important is it that they have maximum platform exposure versus are they buying these businesses just for that single lane, whether it's the sub-stack or the YouTube, obviously that's gonna have most of the value, but how important is it to be spread on top of those other platforms as well? - Media companies are buying other things, they're adding a capability, so that's more of a tech type acquisition. If they're buying another media company, they're buying audience. If someone has a really strong newsletter that has 50,000 engaged people versus someone who has a newsletter with the same audience plus five other random things that have no engagement, I think they'll probably judge them pretty similar. Effectively, when they look at it, they wanna know, okay, if we overlay our ability to grow this, our ability to sell these ads, our ability to bring this value back to our broader platform of consumers that are consuming our media today, it doesn't matter necessarily to be on five or 10, just whatever channels you're in, you have the right engagement. So you see this right now with some people where they have their one main thing and then they're adding stuff and the other things are more, there's light engagement. It gives them an opportunity to test and learn, to see what resonates because each thing is different. That's the tough thing, especially if you're not raising any money or just a little bit of money as a media company, you can't copy and paste what you're doing on one thing and hope it works on the next because it won't. They all have different types of audiences, they all have different feed dynamics, how often you have to post and stuff. So in order to be good on multiple channels, you have to probably have a person thinking about it, you have to change the content slightly. It's not an easy thing. So I think for independent fast growing media companies, it's stick to your lane. If you wanna do other stuff, it's an opportunity to maybe engage with people slightly differently, test things out. But that's more on the digital side. I think that if you do a newsletter and then you have in real life events, that's just like a typical media company. The nice thing with events is they basically become detached from CPMs and you can sell them on a different thing. Influence, there's a lot of reasons why brands will buy events and give someone a lot more money than they would. An event that has 200 or 300 people at it, a brand might spend thousands of dollars where if a couple hundred people showed up to a website, web page, they would get $10. If you have the right engagement on whatever channel you're on, you see some of these live streamers when they walk around New York City cause pandemonium. That to me is just a pure signal that, oh wow, they have real fans. I think any media company wants to buy other media businesses that have true fans that are going crazy. - Where do you think we are in terms of the event cycle? After COVID, there was this pent up demand for more in-person interactions that has been met with an increasing supply, increasing pivot towards a focus on events for media businesses. I know this is not new, but do you have a sense of whether this is a cycle, whether there's a real secular trend here? - I'm not that popular, but I have event invites probably every day. So I can only imagine how many are truly out there. - Axios had their event last Thursday. I think they had 500 people on it. So there's always gonna be room for really good events. There is a lot more. I don't know what happens there. It feels pretty full. There could be double the amount of events, but I don't think there's enough stuff to cover. And the way that it's being covered, I think Axios does a good job where they speed it along and they try to break news. I always make this, it's not a joke. It's like an anecdote. Why would I go to a conference when I can listen to the same content on a podcast and just have it sped up one and a half times? Folks like Axios are doing a better job of trying to break news and making it important to be in the room. But a lot of conferences that are just purely selling content and not the connections are gonna struggle because everyone has the same speakers. Especially if it's like not a reporter interviewing the person, it's a very lightweight conversation that in some instances you're like, "Wait, what did they even say?" That's why Kara Swisher's code conference was really good because it was editorial-led. She effectively brought people she knew really well and she was willing to ask really tough questions. There's moments along the growth of technology where you can point to, "Oh yeah, that was that weird time "where Mark Zuckerberg acted really weird." Or, "Oh, you remember the time Kara brought Bill Gates "and Steve Jobs together?" She had these cultural moments and I think it's usually when it's a journalist-led conference, not just like a random person leading it. So there is room for a lot more. The problem is everyone's go-to-market from a content perspective is literally copying and pasting each other, which I don't think works. - It's a fair point. Things moved away from what's happening on stage to who else is in the room. Now there feels like there's an abundant amount of, "Oh, just trust who else is gonna be in the room "without a real direction." So I think you'll just see a shaking of the weaker branches and people who can dial in either what is excellent that's happening on stage or create better connectivity to the people in the audience because that's what a lot of people go for is the relationships. It's quite interesting. We've touched on the SEO dynamic a few times. I'll bring up a brand like the New York Post where my consumption of the New York Post has dropped just as a matter of Google searches, social media posts. They just get served to me a lot less whereas they used to show up atop and I consumed it just naturally as a result of that. I'm not going to NewYorkPost.com quite frequently. Not to use them as the poster child for what's happening but brands in a similar context. What happens there? - Some of that's bounded by how Google News serves up content. Everyone's probably seen this. You see breaking news and you go to like the New York Times. They have like one paragraph and you're like, "Wait, why did they post this?" It was all to effectively make sure that you were at the top of Google News because Google News used to give people priority who posted first. And a lot of this is changing. They used to have an embargo where they would push people off of Google News if it was within a certain content window. So if it was the first six hours or the 12 hours, they would say, "Okay, we're going to let them come to your website." Well, they're keeping those people on the site. For even big news brands, they're struggling to maintain the organic traffic that they once had and it's happening really fast. Some of these changes and traffic drops, people will tell me, "Oh, well, this public company is doing fine." And I have to remind them, yeah, the numbers you're looking at, everything's historic. So when a company's reporting, it's a couple months old 'cause it's looking backwards. The numbers I'm hearing are double digit declines from organic traffic. There's a lot of fixed cost of publishers. Most of them are already very thin today 'cause organic traffic is free. They didn't have to pay anything to get it. So you start to get into this world where the whole economic model of a publisher, and I think the New York Post is probably a bit more insulated from this, but anybody that's below the top 10 or 20 in a category, if it's a broad category and a smaller number, if it's more of a niche category, they're already suffering mightily. It has a dramatic impact because there's a lot of fixed costs in these businesses that they can't cut as quick. And they've already done a lot. Some of the fastest growing publishers at a smaller or mid-size have basically completely changed their publishing model to cater to the algorithms, which sucks, because most of their content is not as well researched, but they're focused on publishing more faster. And in a lot of cases, there's not really direct reporting. It's just copying what everyone else is writing about. Yes, the decline in the New York Post is happening across the publisher landscape. New York Times is focused on a sub-number. That's how they're growing their business. But I think more and more publishers talk about Google Zero, which is the day where they get no organic traffic. - Is there a solution? I do believe that sometimes secular declines are too hard to overcome, but do any of the new outlets offer a cushion to slowing that decline down or fewer in their seats? Is there anything you could do to offset that? - No, it's kind of scary, but there's nothing to do. That's the problem. When you enter this world where the platforms control who can view your content, it gets really tough. There's just gonna be less media. From a strategic perspective, what you see the media companies doing is being more thoughtful about where they're talking to their consumers, they're collecting more data, they're trying to make their websites more like a destination. For the New York Times, they should try to be targeting you if you like sports. What sports seems you'd like to watch lean into the content verticals where there's probably resonance. But if you're just a generic content news website or pick any vertical, the future is really tough unless you have direct connectivity to the users. - I stopped getting my news from some sources. I mean, social media has overtaken the news sphere so quickly that that's incredibly hard to dig out of, especially if it's not well researched. Everything that we've talked about has a tie to what's happening in AI, but what would you just wax poetic in terms of the impacts that AI are having on the market from any angle you wanna hit on? What would you say stands out? - The biggest thing is people still question if it's going to have an impact and then use weird analogies to say that everything's gonna be fine. Society is very fragile. The reason why we had to shut down during COVID was not because half of the population had COVID, it was because a couple of percentage points and we had to stop the spread. So when you think about how our economy is built, the amount of people that are actually working in the US is not whatever, 300 million plus people, it's a lot less. And the amount of people that actually pay taxes is less than that. AI doesn't really need to impact that many jobs, but if it impacts a couple of them, it will need to radically change how we deliver value to people that aren't working. This idea that the more free time we get, the more creative we get, it's not true. We have more free time than we've ever had and most people are stuck on their phones and they have more anxiety, they have less friends, they have less sex, we're more overweight than we have ever been ever. If there's one fact that someone can point to to say all this extra time and all this extra technology has made our life better, I don't see it. I made this point last week, the only way to coexist with AI in like a normal way is to disconnect, not connect more. The COVID point is we under-appreciate how significant the tax rates will need to increase, not just on ordinary income, I think the safe haven of capital gains and you start to see regressive tax societies in Europe and other places where they start to come after retirement and it's the Elon Musk tax. Let's just figure out a way to tax assets that you haven't sold yet. It has to come because you're gonna have to rebounce out how people make a living, which is gonna be UBI. It's like a weird debate that I get into with people in most of the times, the other side of the debate is just, it's gonna be so great and stuff like that. Great in their minds, which they don't see yet is everybody on GLP Ones, everybody on social media 24 hours a day. To me, that's not good. - If the AI is naturally deflationary where it could do all the road work and it can teach in the schools, pick your various government expenses, then maybe there's some offsetting impact. - I recently bought business class tickets to Japan and I was like, this is so cheap and I can just buy. For a personal expense, I would normally not buy business class tickets on a 15 hour flight. Yes, the world will be completely deflationary and I think most things will be cheap. The problem is most people will be given effectively government money and the people that are creating assets and creating value will make a lot of money and basically be able to do whatever they want. Yes, everything will be cheap but most people won't be able to buy it. - It's very dystopian, but I hear you in terms of the reality of it. - I'm not trying to be the 3 a.m. radio show of the aliens are coming. Play out these basic trends. So if everyone gets an extra hour because of technology, are they gonna put down their phones? I see this every time I take my son to the playground, everyone else is on their phone, which is crazy to me. Put your phone down. If people are given an extra hour, AI is gonna be more addicting, not less. The world's not gonna end for people that are operating businesses. It should be okay, but you just need a recognition that it's probably why I started my own firm. You have to be a creator of economic value. That's the only way to sort of exist. You can't be an employee and then there has to be like a significant recognition. One or two percentage changes in the economic base and how people are employed. If we just take out drivers in the US, Semi-Truck and Uber drivers, that's a big hit to the income base. It has happened before when we had to pay back the debt from World War II, where the tax rates were much higher for an extended period of time. It's less about worrying about it and more about looking at where the trends are going. If you have the realization, you could see the COVID lockdowns coming a couple of weeks before. And I think you can see this coming now where the income base is going to go down. The taxes are gonna go up. There's still a society that you and I want to exist in, which is less technology and more creative. I think there'll be a lot of creativity happening, but for the majority of Americans, and that's, is today 60% of Americans are overweight. It's just a fact. - It's fascinating. I think there's a lot of points that tie into everything else. To wrap things up, if I take what you're saying, if you're to measure attention as being value, which we can debate, social media, the platforms, they're gaining more and more of that share, getting that addiction humming stronger, faster, harder. So those feel like obvious winners. You can make the case that the individual creators or the upstarts who are creating this real connectivity to an audience, there are also net winners in this new environment. Is there anyone else that you would point to that you think could be a winner that emerges from all of this that maybe isn't as obvious? The winners are independent content creators. Someone said this is like, there's never been more independent bookstores. Comedians now don't need a Netflix special, even though they all like to still get that check mark to say that they did that. Some of the highest paid streamers are like 21 years old. You see a future where a lot of them have big brand partners and sponsorships, and then some of them have made their own products and things like that. So as much as there's a negative downside with social media and its addictiveness, there's also a platform when your content resonates to really scale. There's never been a time like that, Oprah says this, when she first got her break, that's why she changed her name. She had to fit within this mold of what they wanted. And then you look at Kaisena or these younger streamers, they're whoever they want. I think the one positive thing is they give their generation the ability, you don't have to be polished. One of them said their highest rated stream was when like a mouse ran into their room and they freaked out. There is an opportunity to show a bit more of their real life and show people of any age, it's okay to not live this perfect world. So I think that's a positive. - I think so too. There's a trust level and an authenticity, especially in the age of AI, which is even more powerful. This has been a pleasure. I know it was very wide ranging. So thank you for diving deep on so many topics. Thank you again for sharing the knowledge here. - Yeah. - To find more episodes of breakdowns ranging from Costco to Visa, to Moderna. Or to sign up for our weekly summary, check out joincolossus.com. That's J-O-I-N-C-O-L-O-S-S-U-S.com.